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SNC-Lavalin casts doubts on Libya projects

Libyan protesters shout as copies of Libyan leader Moammar Gadhafi's Green Book are burned during a demonstration in Benghazi, eastern Libya.

Kevin Frayer/AP

SNC-Lavalin Group Inc. raised doubts about the future of its projects in Libya on Friday as it stopped including several contracts in the North African country in its order backlog.

The Montreal-based engineering and construction giant has also evacuated employees from Libya who wanted out as Libyan leader Moammar Gadhafi has violently cracked down on two weeks of protests calling for his removal.

"The company decided to remove these projects as a precautionary measure that will remain in place until the situation is further clarified," SNC said as it reported a sharp increase in earnings and a big dividend increase Friday.

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Canada has joined the United Nations in slapping sanctions on the Gadhafi government.

Though Ottawa has said the sanctions do not ban commercial activity by Canadian companies in Libya, they prevent financial dealings with the Libyan government and its institutions and agencies, including the Libyan Central Bank.

In 2010, Libya accounted for $418.2-million or about 6.6 per cent of SNC's revenue for the year, up from $278.8-million in 2009.

SNC did not include any fourth-quarter bookings of Libyan projects, including the $450-million Al Kufra Wellfield contract, and removed $484-million in previously booked Libyan projects from the its backlog.

The company has several construction contracts in Libya including an airport, a prison and a massive irrigation project.

At Dec. 31, SNC's backlog stood at $13-billion compared with $12.7-billion at the end of September 2010 and $10.8-billion at the end of December 2009.

Raymond James analyst Frederic Bastien said the company was being very conservative about its prospects in Libya.

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"They're assuming they'll get zero earnings contribution from Libya, so that's probably the most conservative assumption you can get," he said.

SNC-Lavalin said it earned $139.2-million or 91 cents per share for the quarter ended Dec. 31, compared with a profit of $98.7-million or 65 cents per share in the last three months of 2009.

The company said the results included a $26.1-million after-tax gain on the sale of its 10 per cent stake in Valener Inc. and an 11.1 per cent stake in the Trencap Limited Partnership in the quarter.

Revenue totalled $1.9-billion, up from $1.58-billion.

SNC also increased its quarterly dividend to 21 cents per share, up 23.5 per cent from 17 cents.

The average analyst estimate had been for a profit of 75 cents per share, according to Thomson Reuters.

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Mr. Bastien said the company's results beat even his aggressive expectations for the quarter.

"We were highest on the street and they still beat us," Mr. Bastien said.

The company's guidance, for its 2011 profit to hold about steady compared with 2010, was the only weak point for Mr. Bastien.

"I think they are overly cautious this time around because of the uncertainty in the Middle East and Northern Africa," he said.

For the full year, SNC said it earned $437-million or $2.87 per diluted share on $6.31-billion in revenue. That compared with a profit of $359.4-million or $2.36 per diluted share on $6.1-billion in revenue in 2009.

Africa, which included Libya, accounted for a total of $1.14-billion in revenue in 2010, while the company's business in the Middle East totalled $396.6-million.

"Even given recent events, we expect our 2011 net income to be in line with 2010 when we exclude the gains recorded in 2010 from the disposal of the two infrastructure concession investments and from the disposal of certain technology solution assets," president and chief executive Pierre Duhaime said in a statement.

Shares in SNC-Lavalin were up 18 cents at $56.09 Friday afternoon on the Toronto Stock Exchange.

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